If you’re going to start a business, it’s hard to beat something that fuels and funds your passions. Mike Cachat started JensonUSA in the most haphazard of ways, as a teenager, and against his father’s wishes. Now it’s one of the largest online mail order bike parts companies in the world. His early startup methods are a little different than how we’d do it today, but his ingenuity is inspiring (and entertaining). From there, we dive into the nuts and bolts of running a massive business with tons of inventory and a huge payroll, plus how they market through social media, traditional advertising and affiliate programs. Consider this your crash course in running an online store with equal parts good advice and what not to do!
- 01:45 – He founded the company to fund his cycling habit.
- 05:00 – The seed was planted working at another mail order bike shop.
- 07:15 – But it started as a mobile bike repair business.
- 09:00 – Getting inventory, finagling credit card and UPS accounts and launching against his dad’s command.
- 14:50 – Launching with his first ad, and having to find a storefront.
- 22:20 – Why he finally had to let his dad in on things, and why he was working all the time.
- 32:40 – Managing inventory, distributor relationships & growing pains.
- 38:00 – Getting out of a bad financial cycle that could have killed the company.
- 47:00 – Which numbers got them in trouble? How did they fix it?
- 54:00 – What’ their product strategy?
- 59:40 – Their 3 core values are…
- 1:01:40 – Dealing with the competition.
- 1:05:50 – How they reach their customers.
- 1:10:10 – Buidling a great business all comes down to having good people on board.
- 1:15:45 – Parting advice for entrepreneurs.
POST GAME ANALYSIS
What’s most impressive about Mike’s story is his determination to overcome frivolous obstacles like permits, phone lines, being too young to sign up for merchant accounts, etc. He got creative, leveraged his friendships with former employers, and just found a way to make it happen.
His company got its name through a misunderstanding, but speed was of the essence. If you look at his competition (Performance Bike, Chain Reaction, etc.), most are named more logically. This goes to show that a name isn’t necessarily as important as you might think. It’s still important, and if you have the time to work it out, that’s definitely the preference, but ultimately it comes down to what you’re offering and how you’re serving your customers.
When it finally came time to break the news to his dad, he got his ducks in a row and had the financial success to show him. This is just a small example of how it pays to prepare and be ready to counter objections before they arise. Mike’s ingenuity didn’t stop there, because once he had the shop running, he needed employees while juggling all the different duties of a growing mail order business. He was literally wearing all the hats, which is something any entrepreneur knows all about. The upside is you learn how each part of the business operates. The downside is stress, so you need to know when to delegate and determine which duties will have the biggest impact when given to others.
It pays to be frugal when you’re starting out, spending money only where it moves the needle. I employed (and still do) this with Bikerumor by doing without stickers, T-shirts and other schwag because they didn’t improve the bottom line. Instead I spent the money on better servers and paying writers, because those are the things that grow the business. Mike’s upbringing taught him how to save money where he could, but he knew he had to spend it where it counted.
Regarding inventory, Mike focused on stocking the highest demand items, but the model had to evolve over time. They hit a point where they couldn’t deliver fast enough, and were over-promising to customers and taking orders for things they didn’t have in stock. Compile that with poor inventory and sales management, particularly a lack of communication between departments, and you have a recipe for disaster. It came to a head with Mike having to rebuild the trust between him, his customers and his distributors. This forced them to improve their processes and software, but the lesson here is to think big from the outset. Consider what tools you’ll need if you were 10x bigger, 100x bigger, or even 1000x bigger. What processes and systems can you implement now to ease the growing pains and help you ramp up seamlessly.
What almost killed Mike’s business was not being honest with his customers or his suppliers. Mincing words led to distrust, which led to lost business, lawsuits, and damaged relationships. Fortunately, Mike went to them in person, owned up to his mistakes, and made right by them. I’ve had to mend fences in the past, and in every instance, doing it in person and from the heart goes a long way towards making things right. It’s really hard, and it’s not fun, but it’s the right thing to do if you want to run a good business.
One of the biggest problems that led to their early struggles was inventory management. Mike cautions that having systems within your company, including checks and balances between what you’re ordering and what you’re receiving, is critical. And making sure all of your systems are talking to each other, so you aren’t running one for accounting and another for inventory. Fortunately, there are plug-and-play systems nowadays, so the real trick is to make sure they’re set up correctly and that you, as the founder, know what numbers mean what and where they go in the system…even if you’re not the one logging it daily.
As an online retailer, you’re up against the expectation of lower prices created by giants like Amazon and competitors who are known for blowout prices. So, you need a product strategy that differentiates you. Maybe it’s premium product, maybe it’s exclusives, or maybe it’s a focus on house brands. Whatever it is, you need to give your customers a reason to shop with you instead of shopping by price.
Mike has an interesting take on exclusives, though. He says they want to grow in ways that don’t hurt the industry. So, if them getting an exclusive means it hurts the brick-and-mortar bike shops that keep bikes relevant on the local level, then they’ll decline or find a way for it to make sense in the grand scheme of things.
Another interesting take is their approach to working with shops, which are technically their competition. Rather than beat them down by beating them on price, Mike’s trying to find ways to work with them. Creative ideas like selling a service package for parts and bikes that’s fulfilled by a local shop is inclusive and helps the tide rise for everyone. What can you do to turn a competitor into an ally?
Their marketing is heavy on Google Adwords and Shopping results page. His advice? Always be testing. Test different messages, images and other variables to make sure you’re putting the most productive messaging out there. He adds that customer retention (keeping them very happy) is key because it reduces the overall marketing cost. Customer acquisition is expensive, so keeping them coming back for more helps the bottom line.
Mike gives his employees a sense of ownership, which keeps them engaged and feeling like they’re making a difference at the company. Keeping his people happy is job #1, and he credits his people with being his biggest asset. And he lets them experiment. Not everything works out, but they learn from them and each other, and grow because of it.
His parting advice is to find your purpose. This is what will drive you to work long hours and inspire others to follow you on your journey.
LINKS & RESOURCES
- Find JensonUSA on Facebook, Twitter and Instagram
- He recommends the book Scaling Up by Verne Harnish
2 thoughts on “The Build Cycle Podcast #032 – Mail order giant JensonUSA founder Mike Cachat”
Hey Tyler, you know… this interview is like a gift for me as I have been looking at JensonUSA for long years looking for inspiration to run my business. Great work!
Thanks man, glad you enjoyed it! Let me know if there are any other companies or people in the outdoor/adventure/lifestyle space you’re inspired by and I’ll see if they’re a good fit for the podcast.